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Wednesday, March 24, 2010

Portland Post Office scam: It's worse than we thought

We shuddered yesterday to think that the City of Portland would spend $64 million to buy the Main Post Office property from the Postal Service for redevelopment into some wretched Pearl District outgrowth, especially when a 2007 appraisal valued the property at only $45.5 million. We based our outraged blog post on a newspaper story.

But as an alert reader who's been following these shenanigans much more closely points out, the situation is far more alarming than that. In fact, the PDC has already committed in principle to paying the Postal Service 150% of the current appraised value for the property -- and with some additional appraisals floating around at much higher numbers than the 2007 valuation, the purchase price could easily run into the $80 million range!

And to make matters even worse, the PDC has already plunked down into escrow $2 million cash toward the purchase price; $500,000 of that has gone out to the Postal Service and won't be coming back to the city unless it closes the deal. Another $500,000 will go out long before a final deal closes.

This is such a stinker. It's beyond recalling public officials or firing bureaucrats. With a deal this bad, somebody ought to be going to jail.

Comments (22)

This all makes sense now. Leonard needed a large space to run his printing presses, sorting machines, and warehouse space for all the cash he burns through. With his own Water Bureau armed guards for security, he is all set to go.

Maybe this will be the tipping point to wake up this city to all the corrupt and expensive scams that have been going on under our noses. One can hope... and hope someone is held accountable and goes behind bars.

But reconfigured for new tax-paying development and with many more tax-paying Portlanders working or living on the site, it may be worth a lot more.

You know the concept: "highest and best use."

BTW, I don't live in Portland, have no economic interests there, but love reading this blog. However, you tend to see everything your city does in the worst light and occasionally, like this time, you jump to conclusions before thinking things through. Please don't take it personally.

Sorry John... but after living here a long time and watch what used to be a fun and vibrant city circle the drain because of poor judgement and financial shenanigans, it is a deep disappointment. What you see here is a snapshot of the misgivings of our elected officials that only do what is their best interest. This is a dark time for our city. We stay to try to improve it as we can.

Things are pretty twisted -- FUBAR -- when the taxpayers of the City of Portland are bailing out the feds with PDC kickbacks.

It's a blatant case of illegal waste, a violation of trust and breach of fiduciary duty by all of the Portland officials responsible. They all should be held personally liable if that grift is consummated and can't be undone.

When is the Portland *elites'* binge squandering and abuse going to stop? The city has become crowded with gutless wonders.

"Your idea works if the city doesn't give the developer a 20 yr tax abatement to "entice" them to take on the property."

I don't disagree with your sentiments, but tax abatements are used all the time to entice businesses (mostly big businesses).

Intel and the Silicon Forest in Hillsboro are on an Enterprise Zone, which is basically a big tax abatement area for certain industries. The recent departure of Boeing's production of whatever jetliner from Seattle to Carolina was mostly due to grants and tax abatements via the state.

I only say this, because Portland and Oregon are not alone in this. Every state, municipality, rural area is subsidizing industry and to an extent or another.

Even Wal-Mart gets billions in local dollars from free street improvements all around the US, where city officials are all too excited about the prospect of "job creation" (at least with high tech industries it's career creation).

I bring this up, becuase people only seem to criticize the "condo" market as having special interests, when it's more deep than that. I wish to end any and all subsidies of this nature, but the issue is, you can't just point to one element and exclude them from the overall big picture.

This program has nothing to do with "best use" or "job creation." It has to do with perpetuating a failed vision of a carless society where everyone lives close together in condos, rides transit and their bikes to their creative jobs, recycles, and shops at their local organic corner shop.

Paying 150% of the property's value, and offering a 20 year tax abatement (among other things), is nothing more then the city attempting to bypass the free market. What a lot of people around here don't get is that a private party with their own hard-earned investment capital is the ONLY party that can determine the "best use" for a piece of land. If you don't believe me, look at the S. Waterfront where the city turned down many development proposals that would have required zero subsidies because the proposals didn't fit the city's vision.

Paying 150% of the property's value, and offering 20 year tax abatements to a favored developer, is nothing like an "enterprise zone," which is actually a useful job creation tool. In an enterprise zone, cities attempt to entice a business to be created or move into the town with the condition that the business will be making a long term investment. There are usually little restriction on the TYPE of business or development being made; the only condition is that the business will remain long after the tax exemptions expire. If they do not, they pay back taxes.

In this case, the city will offer some kind of back room below market real estate transaction, 20 year tax abatements, and other perks for being located next to a bus/streetcar/light-rail stop to a developer with the condition that they will build condo buildings with small shops on the street level. This is the only type of development that is acceptable to the city.

Anthony:"Paying 150% of the property's value, and offering 20 year tax abatements to a favored developer, is nothing like an "enterprise zone," which is actually a useful job creation tool."

I never said anything about the 150% of the land regarding tax abatements/enterprise zones.

A tax abatement is a tax abatement. It doesn't matter if it's an official "enterprise zone" or not (and you have to be in a certain industry and fulfill a certain criteria for Hillsboro's Enterprise Zone...or any EZ for that matter).

"The program allows a property tax abatement for eligible businesses on any new development (land and existing improvements do not qualify) within the enterprise zone for a three to five year period."

The new Facebook facility in Prineville is a rural Enterprise Zone:

"The Prineville site is in one of the state's long-term rural enterprise zones, which exempts projects from local property taxes while under construction and fully exempts the site from property taxes for up to 15 years once production begins."

PS: This is no way accepting of PDC buying the property. Your wacky logic of defending free-market, private investment conflicts with the very notion of enterprise zones.

Not all businesses qualify for an EZ based on specific criteria set up. This is further compounded because many EZ's have actual, physical boundaries defining them which basically means the area has a finite amount of land for development and not all people can benefit from them.

"What a lot of people around here don't get is that a private party with their own hard-earned investment capital is the ONLY party that can determine the "best use" for a piece of land. If you don't believe me, look at the S. Waterfront where the city turned down many development proposals that would have required zero subsidies because the proposals didn't fit the city's vision."

That's exactly right. If you don't beleive it, just look hat PDC's transaction history. Buy high, sell low. The private maket would never pay what PDC has for the Bridgehead site, or the string of failures up and down MLK.

Wouldn't it be something if this sale happens, but then the USPS decides not to build a replacement sorting facility anywhere, or at least not in Portland?

The main post office doesn't only process Portland mail, so not all that sorting capacity has to be located in the Portland area. In fact, having Portland remain a regional mail-sorting hub is inconsistent with the past few years of USPS decisions concerning the future of mail sorting in the northwest United States. As a result, moving sorting capacity away from Portland would now improve processing times for a lot of mail, which indicates that the USPS has already planned to reduce its presence in Portland.

It would be possible to carve up Portland-specific sorting operations among other existing local facilities. The USPS could use some of the sale proceeds to buy newer machines that would increase sorting capacity at these existing local facilities. Consequently, after the sale, there may be no need to employ many of the people who presently work at the main post office.

In other words, if the USPS sells this property, there is no guarantee that any those hundreds of jobs would relocate to the airport, or anywhere for that matter. Instead, ironically, it's possible that the PDC's plan will result in hundreds of stable postal jobs permanently leaving the area, all at an enormous public cost.

I'm on the Urban Renewal Advisory Committee (URAC) for the River District, which is the URA that the purchase of the Post Office parcel would be funded from.

It's sort of like being an advisor to the advisors of the guy who reports to the decision making group (City Council). But it _is_ fairly transparent, so there's plenty of opportunity to hear the details and the rationale for everything going on in the URAC.

The URAC was only established during the recent extension of the River District area and expiration date (and maximum indebtedness). Prior to that, there was no such group for the River District.

Upon joining, I would say that the idea of purchasing the Postal Office was already sacrosanct in the budget. Indeed there is, as is mentioned in the post, around $60M set aside for just such a purchase. The schedules I have seen in the past few months don't have that happening anytime soon, (several years out) though that could change anytime.

The indebtedness has already been raised, and though the particular bonds may not have been issued yet the money is there in the eyes of PDC and the City. City Council sits on the PDC Budget Committee, and as City Council rules, so PDC must execute.

As a representative of Old Town Chinatown I would say that when a project soaks up $60M+ in the budget, it quickly limits funds that would be available to do any other sort of development, economic or physical within the River District. Even though Old Town was partially annexed into the URA, it will get disproportionately fewer projects because of something like the Post Office purchase.

I know that the Pearl District neighborhood leaders are aware of this, and it is something we discuss at length, but that basic fact still remains.

But no one is under any illusions. 3 votes at City Council would make any of this happen, or not.

NBS, if I were asked to put money down to back up your bet, I'd put it down instantly. Not only is this a shakedown by the Post Office to buy a building that's otherwise a complete white elephant, but selling it to the city for 150 percent of the stated price because nobody else is dumb enough to buy it otherwise. I just have to wonder: which of Mayor Creepy's developer buddies already has a lock on the space once it's demolished?

This is a valuable piece of central city land that is served by commuter and local rail , and is in walking distance of many services. We need to ween ourselves of cars and coal plants , and building new here is the best solution. Should we pay a premium for very desirable
land , yes , it happens all the time. Let's build a clean energy manufacturing plant with work force housing above!

billb
Your ignorance is astounding.
You're living in the conceptual world of central planners.

Instead of the ridiculous generalities in your pitch why not just tell us what prior UR development you want tax funded and repeated at the PO site?

Your idea of a solution is pathetic.

This kind of scheming doesn't ween anything ourselves of cars and coal plants at all.
Yet you declare it to be "the best solution."
How foolish can you be?
Is that what you think SoWa is? The best solution?
If that property os so prime then private develpers can jump on it without any public "partnership" scheme.

the USPS decides not to build a replacement sorting facility anywhere, or at least not in Portland?

I was pretty sure that the USPS actually moved regional sorting to Seattle, so technically a letter mailed within Portland would actually be shipped up to Seattle, sorted, and sent back to Portland.

The Portland sort facility then sorts to the local post offices as well as to the post offices with 970-972 and 986 ZIP codes.

I agree, there's no guarantee that closing this facility would result in an equal number of jobs at an airport facility (where the USPS already has not one, but TWO, facilities - the Airport Post Office, and another facility on the south side near the FedEx, DHL and UPS facilities).

If this was about privatizing this property for the purpose of generating local tax revenue there would be absolutely no need for the city to sign an exlusive negotiating deal. Indeed, the city would want some private developer to come in to compete for the site and gobble it up.

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